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How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
How Do You Know If Its Time To Spend More   Final
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How Do You Know If Its Time To Spend More Final

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This presentation was originally made at the Global Retail Marketing Association leadership council conference in April 2010.

This presentation was originally made at the Global Retail Marketing Association leadership council conference in April 2010.

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  • 1. How Do You Know if it’s Time to Spend MORE? Re-allocating marketing resources in difficult times © 2010 MarketingNPV LLC. All Rights Reserved.
  • 2. Today’s Agenda:  How do you know if it’s time to spend more?  Where should you spend it if you get it?  How can you free up money from current spend to fund new initiatives? 2 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 3. But First, Some Technical Terminology…  Aleanment – how you manage expectations for what will get done with fewer headcount than last year.  Brand Vasequity: A calculation of brand value taken after your marketing budget has been neutered.  Customer Satisfiction: A metric that skews customer feedback in the most favorable terms for your next presentation to senior management.  Dashbored: A comprehensive set of marketing performance metrics that is guaranteed to make your CEO's eyes glaze over.  Dumbographics: Statistical data that describes the consumer segment stupid enough to purchase your competitor's overpriced, poor-quality product or service.  Mantric – the one metric that looks so good you hear about it over and over and over.  Misery Mix Model – a statistical methodology for ascertaining exactly why your plans failed to achieve objectives.  Rigormetrix – stiff adherence to the numbers. 3 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 4. Who We Are  Specialized & Objective Advisory Firm  Exclusive focus on marketing measurement  Publishers of the MarketingNPV Journal  Advisors to Global 1000 clients including: Qwest 4 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 5. Venn and the Art of Marketing Measurement Change Management • Cross-functional alignment • Internal alignment in marketing • Planning process Strategic integration Resource • Knowledge acquisition Allocation Tactical priorities Resource • Decision rights Optimization evolution • Training for users and managers Performance • Internal Measurement communications • Recognition, rewards, and incentives for adoption 5 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 6. Our Research (aka Dave and Pat’s Excellent Adventure) Dave Reibstein Pat LaPointe Managing Partner Managing Partner Questions:  How do you know if you should be spending more or less? 1on 1 Interviews  Where/how can resources be reallocated to best affect? 100+ Companies Mix of industries Comprehensive survey of literature and research in the marketing world CMOs and CFOs Confidence in Direction Marketing Leadership Council 6 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 7. Research Observations How do the “best in class” marketers decide:  When to spend less or when to spend more?  Where should you spend it if you get it?  How can you free up money from current spend to fund new initiatives? Let’s approach them in reverse order… 7 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 8. FINDING $ in the current budget 8 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 9. How to Find Money in Your Budget – Part 1 Use a structured marketing business case to get a disciplined estimated return  Eliminate all spending forecast to achieve at/below target ROR threshold Business Case Financial Summary Projected Benchmark Financial Outcomes Incremental Net Profit $ 14,600,000 - Return on Investment (ROI) 730.0% - Incremental Revenue $ 6,165,000 - Incremental Spend $ 2,000,000 - Total Net Profit $ 175,100,000 $ 160,500,000 Total Net Profit Margin 33.7% 31.3% Total Revenue $ 519,915,000 $ 512,500,000 Total Costs $ 344,815,000 $ 352,000,000 Cost of Goods Sold (COGS) $ 342,815,000 $ 350,000,000 Direct Impacts Units Sold 126,500 125,000 Average Price $ 4,110 $ 4,100 Average Unit Cost $ 1,090 $ 1,100.00 Customer Service Cost $ 1,620 $ 1,700.00 Indirect Impacts Product Availability 79% 75% Product Attractiveness 81% 80% Customer Satisfaction 86% 80% Service Quality 65% 65% Operations Efficiency 71% 70% 9 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 10. How to Find Money in Your Budget – Part 2 Figure out where you are on the marginal returns curve…  Eliminate spending made beneath critical mass point – immature returns  Eliminate spending beyond the point of diminishing return D 1 Total Value Created Zone of Immature C Zone of Returns Diminishing Returns 2 B A Incremental Spend 10 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 11. STRATEGIC allocation. 11 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 12. Re-allocating Spend – Portfolio Management Approach Rank all regions/channels/departments on each dimension as Attractive (A), Neutral (N), or Unattractive (U) relative to other regions/channels/departments 12 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 13. Portfolio Management Works At Customer Level Too … The customer portfolio framework can incorporate elements of both acquisition and retention to ensure both perspectives are given appropriate consideration 13 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 14. Comparing Allocation Strategy to Current Marketing Spend Relative Marketing Spend YOY Very Low Low Moderate High Very High Segment C Exploit Spend More Expand Segment A Segment D Maintain Segment G Segment H Harvest Segment F Fix Segment B Exit Segment E Spend Less 14 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 15. Time To Spend MORE ? 15 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 16. Look for Points of Leverage Where are the specific leverage • How strong is your value proposition, brand points for incremental Competitive power, response efficiency, etc.? Strengths profitability? Look to your company’s comparative strengths & • How profitable are current customers? How weaknesses vs. competitors. Customer switchable are prospective customers? Value • How sensitive is the market to promo Response activity by you or competitors? Elasticity Effective ad copy drives 4 to 10X the impact of average copy. • Is your message clear, relevant, and Message distinctive in a defensible way? Clarity Bringing finance into the discussion, to ensure the company’s balance sheet can handle higher levels of risk exposure 16 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 17. What Will Your Competitors Do? BIG WIN? Could be huge if ARMS RACE Act your value Everyone’s costs proposition is go up. You lose. strong YOU CAUGHT SLEEPING You could lose Don’t STATUS QUO share and Act customers difficult to win back. Don’t Act THEM Act 17 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 18. Calculate the Probabilities Act +$100 -$200 Expected 10% 30% Value: -$50 YOU $0 -$100 Expected Don’t Value: Act 50% 10% -$10 Don’t THEM Act Act 18 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 19. How to Close Knowledge Gaps? How did NASA put a Man on the Moon? 19 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 20. Filling Knowledge Gaps 1. Break big problems into smaller component parts 2. Identify the “known unknowns” 3. Create a process for extracting expert opinions to form hypotheses (aka assumptions) on the “unknowns” 4. Assess the relative importance of and relationships between hypotheses 5. Conduct experiments to validate individual hypotheses 6. Assess the risk/value of further testing or research How did NASA put a Man on the Moon? 7. Repeat for all priority “unknowns” 8. Reassemble the big picture 9. Identify the next set of unknowns 10. Repeat Step 1 20 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 21. And Speaking of Rocket Science… Borrowing from Ray Kurzweil: The transformation of marketing from “art” to “science” is accelerating on an exponential curve 1. Backward-looking, statistically-based models are being dis-adopted • Agent-based models – which replicate thought processes and predict behaviors are receiving an enormous amount if investment in dollars and time 2. Brand strategies derived through traditional research methods are (probabilistically speaking) less likely to be compelling and differentiated than those derived through neuro-linguistic analysis and brain imaging 3. Ad copy testing has moved from directionally predictive (eyeball tracking) to highly accurate biometric feedback • We don’t yet understand exactly WHY they love what they love, but we can certainly know (with great precision) WHAT they will/won’t love. In short, current market research techniques have come to the end of their lifecycle and are being replaced with more insightful, predictive methods. 21 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 22. But DON’T rush out and begin trying these things ad-hoc 22 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 23. Instead… Focus on building a more disciplined and structured approach to THINKING about marketing effectiveness and efficiency: 1. Squeeze current budgets using marginal returns analysis. 2. Higher levels of marketing business case competency. • Better business case discipline is the new currency of credibility. 3. Allocate spend strategically. • Spend levels and shifts are in line with strategy for competing both today and tomorrow. 4. Spend more only when/where you have LEVERAGE. 5. Don’t let data gaps be an excuse to procrastinate. • Anticipate the key questions and get working on answers now. Lead the process, don’t get dragged behind it. 23 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 24. And Avoid This Outcome… We built a model that projected your performance for the next five years. You’re fired. 24 © 2010 MarketingNPV LLC. All Rights Reserved.
  • 25. thank you. www.MarketingNPV.com Pat.LaPointe@MarketingNPV.com © 2010 MarketingNPV LLC. All Rights Reserved.

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